AI for Debit Routing: Saving on Debit Transactions

In fact, there are two areas where it can excel: debit routing and fraud prevention. In this article, we’ll look at the first one – how AI can help save your business money through debit card interchange optimization.

• Debit Routing Background
• The Durbin Amendment and PIN Debit Routing
• Choosing Debit Networks
• AI for Debit Routing
• Which processors offer AI debit routing optimization?
• Which businesses benefit the most from AI debit routing for cost savings?
• PIN Debit vs. Signature Debit Costs
• Maximizing Your Savings with AI Debit Routing
• One Caveat to Debit Routing Savings

Debit Routing Background

In order to cover the possible benefits of AI for debit routing, it’s important to have a solid understanding of what debit routing is and how it happens now.

Firstly, there are two “types”of debit transactions: PIN debit, where a customer enters their PIN to authorize the transaction, and signature debit, where a customer signs their name to authorize the transaction. Signature debit, sometimes referred to as “running as credit” means that the transaction will be processed on the network of the credit card company whose logo is on the card.

PIN debit means that the transaction will be processed on a PIN debit network and subject to the debit network’s fees. But which network? That’s where debit routing comes in. And for that, we need to look at the Durbin Amendment.

The Durbin Amendment and PIN Debit Routing

In the processing world, the Durbin Amendment to the Dodd Frank Wall Street Reform and Consumer Protection Act (commonly just called the Durbin Amendment) gets the most attention for its cap on debit interchange fees.

However, there’s another aspect that’s also significant: a requirement for all banks that issue cards (regardless of bank size) to allow routing for debit transactions through at least two “unaffiliated” networks. It also blocks the card networks from restricting the networks that a business (or card issuer) can choose. The goal is to lower costs by increasing competition, a cornerstone of free markets.

What does that mean in reality?

It means that instead of being forced to use a particular network (and incurring whatever costs that network imposed) businesses had options to choose a lower cost network. Prior to the Durbin Amendment, businesses had no choice. Often, debit network routing went through related (or affiliated) networks, usually with high costs.

The Durbin Amendment, in requiring issuers to enable at least two unaffiliated networks and permitting businesses the right to choose which networks, opened up competition and the opportunity to reduce debit transaction costs. You can read more about this in our article on attempts to repeal the Durbin Amendment.

Choosing Debit Networks

Of course, the ability to choose debit networks for routing doesn’t automatically mean that businesses actually make those choices. There are many different networks and it’s a niche aspect of payment processing that can go overlooked. Even business owners that want to get involved may find it too complex. That’s where AI can step in effectively.

AI for Debit Routing

Tools for routing optimization based on cost already exist, but the evolution of AI has made it possible to create more powerful and more robust tools.

In February 2025, Payments Journal posted an article on AI being the key to saving money on debit transactions. The article focuses heavily on Adyen and its Intelligent Payment Routing for US Debit and it’s unclear if the article was written by or sponsored by Adyen. However, the article highlights the possibilities for AI and machine learning to leverage data in real-time to make better decisions about routing using many different variables. Best of all, it’s not something you as the business owner would need to worry about.

With AI debit routing, the tool analyzes your transactions and compares options to optimize routing on a per-transaction basis, ensuring that you’re paying the lowest possible fee for the specific card and transaction you’re processing. This all happens in the background when you use routing optimization-enabled tools and equipment.

Which processors offer AI debit routing optimization?

There are many different companies that either already offer or plan to offer AI-backed intelligence tools, including debit card transaction routing. Some of those include:

• Square
• Fiserv (formerly First Data)
• Adyen, as noted in the Payments Journal article
• Worldpay / Vantiv

All of these companies have some version of least-cost / smart routing that can help businesses ensure that transactions are routed over lower cost networks. Fiserv even has a debit routing brochure touting its ability to optimize debit costs.

Which businesses benefit the most from AI debit routing for cost savings?

As you’d expected, businesses with lots of PIN debit transactions (as opposed to cash, credit, or signature debit transactions) will benefit the most.

Typically, when we talk about debit card transactions here at CardFellow, we need to make distinctions between “PIN” (or “online”) debit and “signature” (or “offline”) debit, and we need to do that here as well.

In the case of debit interchange optimization, the routing considerations (and possible savings) will only apply to PIN debit transactions. Even though signature debit transactions that you “run as credit” are still debit transactions, they are no longer processed on the PIN debit networks. Instead, they are processed on the credit network – hence “running as credit.”

That means that if you take a lot of debit cards and are interested in optimizing costs through debit routing, you’ll need to make sure you have a PIN pad for customers to enter their PIN when completing the transaction. That brings up one other consideration, though: should you be pushing PIN debit in the first place or is signature debit cheaper?

PIN Debit vs. Signature Debit Costs

I actually wrote an entire article on PIN debit or signature debit to explain the different costs associated and when one is better than the other. If you don’t have time to read the whole thing right now, I’ll summarize: generally, PIN debit will be the lower cost of the two debit types for businesses with larger average transaction sizes. If that’s you, it’s a good idea to have a PIN pad handy. For businesses with smaller average debit transactions, signature debit is usually the way to go, and you won’t need to concern yourself with debit routing as much.

Maximizing Your Savings with AI Debit Routing

Okay, so you’ve read through this article, you’re confident that PIN debit is the better option of the two types of debit transactions for your business and you want to optimize routing to reduce costs.

The first step to optimizing your debit routing for savings is working with a processing company that makes it easy. Many business owners are confused when presented with the array of debit network options and aren’t certain how to optimize routing. Having a processing partner that sets it up for you, or integrates smart routing with your processing devices, can minimize headaches. The brief list above is one place to start, but you can also get quotes from credit card processors right here at CardFellow to check into debit routing savings available.

One Caveat to Debit Routing Savings

There’s one important caveat to all of this: pricing model. If your credit card processor doesn’t pass along the true cost of interchange and assessments to you, without padding, you won’t see savings from optimized debit routing even if you do it perfectly.

Instead, the savings from optimized debit interchange would simply go to your processing company as extra profit. How do you avoid that? Sign up with a processing company that offers true pass-through pricing, also called interchange plus and monitor your statements, comparing them against published interchange tables to ensure you’re receiving true cost.

If that sounds like too much of a hassle, you can have us do it for you, for free. CardFellow offers a marketplace to get quotes from processing companies that are bound by legal agreement to offer you true pass-through pricing. We’ll also do that statement monitoring for you, ensuring your costs are exactly as they should be.

It’s free, it’s private – give it a try at www.cardfellow.com.